Eurozone Braces for ECB Rate Hikes Amidst Inflation Fears

Borrowing costs in the eurozone increased as markets anticipated potential interest rate hikes by the European Central Bank to combat rising inflation, driven by persistent high energy prices. Despite a reported incident in the Strait of Hormuz impacting oil costs, skepticism over its accuracy tempered bond yield spikes.

Eurozone borrowing costs saw an uptick on Monday, driven by market concerns that the European Central Bank (ECB) might soon raise rates to fight inflation, as oil prices receded slightly from their recent highs.

Bond yields extended their climb after a report from Iran's Fars news agency claiming a U.S. warship attempting to navigate the Strait of Hormuz was turned back, reportedly hit by two missiles—a story firmly denied by senior U.S. officials.

Despite UK markets being closed for a public holiday, Germany's 10-year Bund yield rose by 2.5 basis points to 3.06%, with Italian yields seeing a similar increase. Policymakers hinted at potential rate hikes at the ECB's upcoming meetings, amid persistent energy-induced inflation threats.